'Earn a cheap car' with Capital One

Competition among credit card providers has stepped up a gear in recent months, but while the focus has primarily been on improving interest-free offerings, some providers are also turning their attention to reward schemes.

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Capital One, for example, has unveiled a new reward credit card, in partnership with Vauxhall Motors,  which enables you to save up to £1,500 off a new Vauxhall car. But is it as good as it sounds? Let's take a closer look.

What's the deal?

Capital One's new Vauxhall Rewards credit card allows you to earn Rewards Points every time you spend on the card. You will earn points worth 6% of the value of your purchases in the first three months, or on the first £3,000 spend, whichever is reached first. After this, you'll earn points worth 3% of the value of your purchases.

For every Reward Point you earn, you will get a £1 discount off a new Vauxhall vehicle, up to a maximum of £1,500. This is in addition to any other finance agreements, deals and discounts the dealership may be offering. You can redeem your points at any participating Vauxhall retailer.

Cardholders will be given a credit limit of between £2,000 and £12,000 depending on their credit score, and will also benefit from 0% on purchases for the first six months. After this, the representative annual percentage rate (APR) of 17.9% (variable) will kick in.
What's more, you'll automatically become a member of Vauxhall's MasterFit Service Club which will give you discounts on maintenance costs. 

Who's it good for?

The Capital One Vauxhall Rewards Credit Card will suit those who use their credit card for all spending and who are looking to buy a new car in the coming months.

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Any catches?

There is a big catch with the Capital One Vauxhall Rewards card, however. According to our sums at MoneySuperMarket, in order to benefit from the maximum £1,500 discount, you'll need to spend a whopping £47,000 on your card. What’s more, this will have to be within the first four years as, after this time, your points will expire.

In order to reach this amount, you'll need to use your card for your everyday spending as well as for larger purchases such as holidays. But even then, you could find it a struggle. However, Capital One will allow you to pool your points together with another cardholder (so long as they are a family member) which means you build up your points quicker.

However, the same maximum £1,500 discount still applies - and only to certain car models – the Vauxhall Ampera and Insignia. If you choose a Vauxhall ADAM or Agila, instead, your discount will be capped at £500, while if you choose a Corsa or Antara, it will be capped at £1,000. Should you prefer an Astra or a Zafira, the maximum discount you'll achieve is £1,250.

Remember too that you'll only benefit from interest-free spending for the first six months. After this the representative APR of 17.9% (variable) will kick in and if you don't clear your balance every single month, the amount you pay in interest could well outweigh any discounts you receive. 

Finally, in order to apply for the Capital One Vauxhall Rewards card, you'll need to be at least 21 years old and have an income of more than £20,000. You will also need an excellent credit rating.

What's the verdict?

On the face of it, Capital One's Vauxhall Rewards Credit Card looks like a great way to save money on a new car, but scratch beneath the surface and you'll soon discover it's not as simple as it sounds.

Unless you regularly spend large amounts on your credit card and you can afford to pay off your balance in full every month, the Capital One Vauxhall Rewards credit card is unlikely to be the best choice for you.

And even if you do clear your balance each month, you might prefer to use a cashback credit card instead, as this will offer more flexibility. Instead of being limited to which car you can choose, you'll be able to put your cashback towards the cost of a new car, no matter what make or model it is or whether it's new or second-hand. However, bear in mind that cashback is usually calculated annually and credited to your account.

For example, the American Express Platinum Cashback credit card offers 5% cashback on up to £2,500 of purchases in the first three months and 1.25% cashback after that. You will also earn double cashback (2.5%) for one month every year if you spend more than £1,001 in the previous 12 months. However, be aware there is a £25 annual fee and the representative APR is 18.7% (variable).

To give you an idea of how much you could earn, if you were to spend £1,000 a month on the American Express card, you would earn £212.50 (minus fee) in cashback after 12 months. Boost that spend to £3,000 a month and you could earn £437.50 in cashback after a year.

To find out more about cashback credit cards, take a look at my article How to make the most cashback.

Top tip!

In order to qualify for the best credit card deals, you'll need a top-notch credit rating. So if you haven't checked yours for a while, it's worth getting hold of a copy of your credit report from one of the credit reference agencies which you can compare on our credit monitoring channel. If your credit score isn't looking too healthy, take a look at Jessica Bown's Five ways to boost your credit score.  Our SmartSearch tool will also give you an idea of the credit cards you're more likely to be accepted for, without leaving a footprint on your credit file.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
 

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